Utility Commission approves bonding and rates to fund expansion of water treatment facility

August 2, 2018

The rendering above shows plans for the expansion of OMU’s Cavin Water Treatment Facility from a capacity of 10 million gallons to 30 million gallons.

Thursday, August 2­–At its regular meeting today, OMU’s Utility Commission approved the issuance of bonds and a two-step rate increase to fund the $48.6 million project which would expand its newest treatment facility.

The decision to upgrade the Cavin infrastructure, which would eliminate the need for the aging Plant A facility, was made after it was determined Plant A’s filter building was settling, potentially compromising the integrity of the structure and straining aged cast-iron supply mains which will threaten the utility’s ability to provide an ample water supply.

Plant A provides the majority of the water used by OMU customers, as well as its wholesale customers (the East, West and Southeast water districts) which deliver water to consumers throughout Daviess County. The 18-million-gallon-per-day facility was put into operation in 1904.

The Cavin Plant, currently with a 10-million-gallon capacity, was developed and constructed with the intent to be expanded. Two additional 10-million-gallon production trains would replace the capacity currently provided by Plant A.

In order to fund this expansion, a total of $48.6 million in bonds are proposed to be issued and two rate increases would be required to repay those bonds: a 20% rate increase effective October 1, 2018 and a 12% adjustment on June 1, 2019. This would result in a total increase of $5.09 per month for the average residential customer.

Both the rate increase and bonding ordinance will be considered for approval by the Owensboro City Commission in August.

Aging infrastructure (including mains and treatment facilities) is a nationwide issues, as similar utilities plan for retirements of production facilities and large main replacement projects. For instance, Evansville recently announced a long-term main replacement program and Bowling Green Municipal Utilities is preparing for the construction of an expanded treatment facility.

Frequently asked questions regarding the Cavin Plant Expansion

Why expand the Cavin Plant?

The structural problems at OMU’s Plant A Water Treatment Facility and aging infrastructure has led OMU to plan for the expansion of the Cavin Treatment Facility. Cavin was designed to be expanded from its current 10 MGD capacity to 40 MGD. The planned expansion to 30 MGD would provide enough capacity to meet peak loads and allow for operational flexibility and maintenance.

What is the cost of the expansion project?

The cost for the entire project is approximately $48.6 million. The issuance of bonds will assist the utility in the construction of this expansion and rate adjustments will provide for the repayment of those bonds.

What is the rate impact for residential customers?

The average residential customer, using about 506 cubic feet (3,785 gallons) per month, would see an increase of $5.09 per month. (This includes a 20% rate increase effective October 1, 2018 and a 12% adjustment on June 1, 2019.)

What is the time table for the Cavin Expansion Project?

The engineering for this project is complete. We anticipate issuing bids for labor and materials starting in August. Construction is expected to take two years. We anticipate an operational start date of 2020.

Would the 1994 and recent main breaks be avoided?

All three breaks involved aging infrastructure located at the Plant A facility and involved mains dating back to the original construction and early years of its operation.

How are the water districts involved in this arrangement?

OMU supplies water to three water districts (East, Southeast and West). As a result, existing contracts were amended to include costs associated with the construction and operating costs for the Cavin Plant expansion. Negotiations took place to develop an arrangement that best suited each of the parties and OMU’s customers.

How do we compare regionally with our current rates?

The chart shown here demonstrates where we align with rates in our region and state based upon 506 cf per month usage. The average rate for OMU residential customers would increase to $19.98 per month.